NOTICE OF DISCIPLINARY ACTION

#

COMEX 12-9009-BC

Effective Date

24 February 2014

FILE NO.:

COMEX 12-9009-BC

NON-MEMBER:

Jefferies Bache Financial Services Inc.

EXCHANGE RULE:

538.A. Nature of an EFRP

An EFRP consists of two discrete but related simultaneous transactions. One party to the EFRP must be the buyer of (or the holder of the long market exposure associated with) the related position and the seller of the corresponding Exchange contract. The other party to the EFRP must be the seller of (or the holder of the short market exposure associated with) the related position and the buyer of the corresponding Exchange contract. However, a member firm may facilitate, as principal, the related position on behalf of a customer; provided that the member firm can demonstrate that the related position was passed through to the customer who received the Exchange contract position as part of the EFRP.

538.H. Documentation

Parties to any EFRP transaction must maintain all documents relevant to the Exchange contract and the cash, OTC swap, OTC option, or other OTC derivatives, including all documents customarily generated in accordance with relevant market practices and any documents reflecting payment and transfer of title. Any such documents must be provided to the Exchange upon request, and it shall be the responsibility of the carrying clearing member firm to provide such requested documentation on a timely basis.

432.X General Offenses

It shall be an offense to aid and abet the commission of any offense against the Exchange.

FINDINGS:

Pursuant to an offer of settlement that Jefferies Bache Financial Services (“JBFSI”) presented at a hearing on February 20, 2014 in which JBFSI neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“Panel”) found that JBFSI is subject to the jurisdiction of the Exchange pursuant to NYMEX Rules 400 and 402 because it is an affiliate of COMEX clearing member, Jefferies Bache, LLC (“Jefferies”). The Panel also found that on July 30, 2012, JBFSI brokered two EFRP transactions in which Jefferies and another market participant were supposed to be counterparties. JBFSI improperly reported the transactions to the Exchange with the other market participant on both sides of the transactions, thereby executing non bona fide EFRPs, and assisting the other market participant into entering into wash EFRPs to flatten its positions in violation of Exchange Rules. In addition, the Panel found that the transactions did not contain documentation of the corresponding cash positions and, therefore, for this reason as well, were not bona fide EFRP transactions.

The Panel found that as a result, JBFSI violated Rules 538.A, 538.H. and 432.X.

PENALTY:

In accordance with the settlement offer, the Panel ordered JBFSI to pay a fine to the Exchange in the amount of $35,000.

Interact With

Global Websites

Contact Us

CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.